Distressed Properties

The state's quick budget fix of selling off public buildings is a horrible idea.

And it's a sneaky way to profit by helping private corporations dodge federal income taxes. Private organizations and individuals, such as those expressing interest in buying state buildings, are allowed by the IRS to deduct a building's wear and tear from federal income taxes.

Governments such as California's don't pay federal taxes. So despite owning many billions of dollars' worth of real estate, our state government can't take advantage of this tax deduction. "It's kind of a gimmick for California to get money from the feds," Golden Gate University law professor Myron Moskovitz notes.

Perhaps the worst aspect of this deal is that this kind of cagey, politically motivated, fiscally irresponsible asset sale besmirches the good name of privatization. Though his deeds are wrong, Schwarzenegger's words surrounding this deal are right: Selling off assets, when done intelligently, can in certain cases improve government's ability to provide services.

If used as a strategic tool, rather than a way to push budget problems into the future, privatization could be a weapon to create jobs and make public agencies function more efficiently. Here are a few examples.

Take Muni — please? For a John Lennon moment, imagine San Francisco's city leaders had the cojones and public support to sell Muni bus routes to private operators. To most of us who don't remember the private Key System mass transit network covering most of the Bay Area from 1903 to 1960, this may sound preposterous. But in Mexico, a country far more socialistic than the United States, thousands of private, SuperShuttle-style jitneys serve the nation's capital. In combination with an excellent public subway system, they make it possible for residents to live within minutes of cheap, swift transit rides almost anywhere in that massive city. That's very different from here, despite a midsized nation's worth of public spending on transportation.

Oh, no: SFO. If only we could change federal and local laws to allow for the privatization of San Francisco's airport. That little-noticed swath of asphalt and empty eateries south of the city is a sinecure for public officials with questionable pasts. Airport director John Martin is notorious for having overseen a secretive, illegal scheme to divert San Francisco funds into the privatized airports of Honduras. Under his watch, local airport construction projects became money grabs for politically linked contractors. And why not? His putative boss, Airport Commission president Larry Mazzola, is a plumbers' union chief who was investigated by the U.S. Department of Labor for his involvement in a scheme to divert $50 million in worker benefit funds. Airport privatization isn't pie-in-the-sky: Canada and Britain, bastions of public services such as universal health care, have led the world in contracting airport services to the private sector.

Not-so-freeways. Republican health care wonks (yes, they exist) like to remind us that the system is out of whack in part because consumers don't pay directly for services used. The same is true for roadways, which are financed with a gasoline tax voters refuse to raise, thus letting the system fall into disrepair. Why not change state and federal laws and sell I-80, I-5, I-505, I-280, and the rest of our freeways to private toll-road operators and allow them to charge unsubsidized user fees to pay for the true costs of freeway real estate, infrastructure, and upkeep? We'd have better roads, along with incentives for some commuters to use public transit such as BART.

The list of possible smart ways to sell off government assets could fill a book. Unfortunately, this tome would not contain a chapter on selling the San Francisco buildings housing the Supreme Court and the Public Utilities Commission. "My gut tells me this should not happen," Casper said.

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